Riding Man author Mark Gardiner provides insight into motorcycle racing, history, and industry news. A focus on road racing is to be expected from an ex-Isle of Man TT racer but Backmarker also covers everything from flat track to electric bikes.

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Monday, January 4, 2016

Harley-Davidson and the GOP have the same problem

In the last few months, Harley-Davidson’s stock has fallen about 20%. Most of that drop occurred in one day last October, when Matt Levatich told an investment call the company was cutting guidance for overall 2015 results based on a lackluster Q3.

Harley’s problems are not, however, of a quarter-to-quarter (or year-to-year) nature. Harley shares the same big, structural issues with another brand that is very much in the news: the Republican Party. In particular, where the 2016 Presidential election is concerned.

My fellow Canadian ― the economist David Foot, author of ‘Boom, Bust, and Echo; How to Profit From the Coming Demographic Shift’ ― once said, “Demographics explains two-thirds of everything.” And both Harley and the GOP face the same demographic challenge. That is to say, both brands are favored by angry old white guys; a market that is literally dying off, while the U.S. gets younger and more diverse every year.

There are guys back in the smoke-filled rooms at the Republican National Committee who cringe every time Donald Trump says he wants to build a wall along the border with Mexico, because they know that he’s alienating Latino voters in states like Nevada and Colorado that are in play in 2016. Even reliably-Republican Texas will become a swing state before long, as Hispanic Texans will outnumber white ones by 2020 and be an outright majority in about 30 years.

When Mitt Romney ran against Obama, he barely pulled 20% of the Latino vote. It’s now accepted wisdom amongst political strategists that it is not possible to win that office with less than about 40% of the Latino vote.

"I don't actually ride a motorcycle, but if I did, I'd ride this douchebag's motorcycle.

Harley-Davidson needs a far more diverse market too. Although the company has long owned the angry old white guy demographic ― and those guys seem, if anything, angrier than ever ― as they age, they will inevitably stop buying new motorcycles. And the scale of Harley’s problem is, to say the least, challenging. Put it this way: about half of all the ‘heavyweight’ motorcycles (over 600cc) sold in the U.S. are still Harleys. 2008 was the last year that Harley released its data on customer ages. But back then, it admitted that the average age of new-Harley buyers had already climbed to nearly 50.

Harley blithely says it is targeting younger riders and a more diverse crowd. But that really doesn’t address the scope of the problem.

They say “50 is the new thirty”, and “Seventy is the new 50” and shit like that. But the problem for Harley is, 85 is still eighty-five. If most of Harley’s buyers are over 50 and most of those guys, by definition, are going to stop buying new bikes sooner or later... simple math says that Harley doesn’t just have to do a better job of attracting the young, less-uniformly-white audience that currently favors other brands; it has to do a way, way better job.

Think about it: Harley still has almost half the market, but if the half it has is aging out and the company wants to preserve its sales, it has to capture virtually all of every competitor’s market share ― not to grow, just to maintain volumes.

The GOP has successfully gerrymandered Congress; it will have a majority in the House for decades. (Sorry, Democrats, but in all that ‘Change’ euphoria, GOP strategists completely outplayed you.) But when it comes to electing Presidents, the lily-white GOP is basically reduced to hoping that the Democratic candidate self-destructs and young, non-white Dem-leaning voters stay home.

Harley and the GOP don’t just have a problem in that their brands are favored by angry old white guys; it’s way worse than that. They’ve both styled their brands to appeal to the same base of (often Confederate-) flag-waving, ‘Murica-Fuck-yeah, open-carry conservative white guys. Neither brand is eager to alienate that base; in fact, they’re afraid to stop pandering to it. And that means they’re wrapping their brand in imagery that strikes younger and more-diverse consumers as out-of-date at best and coded racism at worst. But wait, it gets worse; the core supporters of both brands are angered when the brand even attempts to woo new fans with language and imagery that deviates from the arch-conservative.(To be clear: There will be guys in the marketing dept. in Milwaukee who'll read this and think, "But what about our product placement in the Captain America movie?" That was an attempt at dog-whistle marketing; an effort to reach out to the young, liberal movie audience that Harley's conservative base despise, but that Harley's base would either not see at all or if they did see, would interpret it differently. It was a nice try, but you can not build a great brand on product placement.)

Harley-Davidson is smart enough to realize that it has to be on the right (read: 'left') side of some conservative image issues. For example, The Motor Company has officially said no dealerships can sell Confederate-flag clothing. That doesn't change the fact that its customer base is overwhelmingly made up of the very same angry white guys who support The Donald. If you don't believe me, set up a booth registering Democratic voters at next summer's Sturgis rally, and tell me how it works out for you.

Harley and the GOP’s dilemma is that they can either attempt the tricky challenge of crafting two entirely different messages; one for the base and one for new fans, in the hope that neither group is exposed to the others’ message. Or, they can suck it up and just make the brand-jump from the old image to a new, younger message that will resonate with a diverse audience.

Way back in the ‘90s, there was a business book called, If It Ain’t Broke, Break It. Back then, I remember thinking that it was total bullshit advice. As an ad guy, I knew that for every client who stuck with a good campaign too long, there were two or three clients who abandoned good campaigns too soon.

But Harley really should have broken the brand. What would that have looked like? Building a bike to compete with the more technically advanced, sportier brands favored by younger buyers.

There’s an object lesson in an iconic American brand that was stuck with an obsolete product that appealed only to aging consumers, and worked its way out of the bind: Cadillac. Back in the ‘90s, If you had told me that some day I’d want a Cadillac, I would have laughed in your face. (And ironically, I wrote a ton of ads for them.) Remember when Cadillac said, “Fuck it, we’ll race at Le Mans”? That was the beginning of a beautiful thing. In the last decade or so, Cadillac relentlessly improved tech and performance, without fear that they were inevitably alienating their old customers.

A couple of years ago, Cadillac briefly tried to recapture the brand's old, original, conservative white male market with this famous ad. To get a sense of how it went over, try entering the phrase "Cadillac ad d..." in Google and watch it fill in '...ouchebag'.

There must’ve been a group in Milwaukee that thought that way, too, when Harley briefly attempted to build the VR1000 superbike and compete with Ducati on the race track. Some day I’d love to write an in-depth assessment of what went wrong with that project. I have a little more insight into the Buell debacle; I think that a big part of the problem, for Buell, was that there were people in H-D head office (and far more at the dealer level) who actively resented the Buell brand. There were plenty of people in orange and black who had grown to hate the jeering sport bike riders, and those H-D employees resented Erik Buell for trying to make a competitive sport bike and, worse, failing.

In 1994, Harley-Davidson attempted to take on European (and possibly to a lesser extent) Japanese competitors with the VR1000 Superbike. That project limped along until about 2000. That was when the Cadillac LMP ('Le Mans Project') broke cover. Neither of these race machines was very successful. But Cadillac sent a signal with the LMP that it was willing to reinvent itself, and build cars to compete, technically and performance-wise, with the European and Japanese luxury brands. Sadly, Harley concluded, "Let's never do that again."

I thought that Harley had played a strategic master-stroke about a year and half ago, when I rode the Livewire. As I wrote at the time, Harley could leapfrog right over those high-performance ICE sport bikes and bring out the first truly mainstream EV motorcycle. I was sure that the Livewire was not a 'market test' but a real prototype. Now, I'm not so sure; if there are any plans to commercialize the Livewire, I’ve not heard about it. And in the meantime, Polaris has purchased Brammo. (And Polaris’ Indian brand seems to be doing a better job of taking an iconic American motorcycle brand, and upgrading its technology and performance.)

Right now, the GOP is desperately hoping that, somehow, more than half the American electorate will forget the appalling rhetoric of the Republican primaries, and that the GOP nominee ― whoever he or Carly Fiorina is ― will be able to wrap himself in less overtly racist imagery for the general election. The Republicans may succeed in convincing a few younger, less white voters to come over. But really all they’re hoping for is that he Democratic nominee will self destruct and, as a result, Democratic leaning voters won’t show up on November 2. The only long-term strategy for the Republicans is to field a candidate that a more diverse U.S. actually finds palatable, and the party cannot do that unless it’s willing to alienate its base.

That definitely isn’t a strategy for Harley. They can't wait for competitors to self-destruct; not by a long shot. So Harley can either age out of relevance with its current customers, while perhaps succeeding in selling its current bikes in, say, half the volume at best to a younger and more diverse audience.

Or, Harley can learn from the painful failures of the VR1000 and Buell ― and perhaps pay attention to some of the things Polaris is doing right with Indian ― and develop a strategy to grab market share from a younger and more diverse demographic with a revitalized 21st-century brand.

So, here's my executive summary for Matt Levatich: In the long run, winning does not look like convincing younger and more diverse consumers that they are wrong about the Harley brand. Winning looks like building bikes those people actually want.

5 comments:

I've been riding Harleys since 1972 when I was 16. I rode big twins.. But now I ride ironheads sportsters as they are dirt cheap !! I am on fixed income.my fave new Harley is the 750 street... Oh..and I'm very liberal. I would never drive a big big Harley anymore

After having discovered sportbikes after 18 years of owning cruisers, including a Harley, I cant see Harley ever making a bike I woukd even consider buying. Unless they made that electric bike. That one would tempt me.